All you Need to Know about the EMP501 Reconciliation Process

Posted by Bernard Schoeman on 19 March 2018.

Bernard Schoeman

CA(SA), Post Graduate Diploma Accounting, BCom

The Tax Shop Head Office

More about Bernard Schoeman

Bernard studied BCom majoring in information systems and accounting at the University of Cape Town and qualified as a Chartered Accountant (SA) in 1997 after completing of his articles with Deloitte & Touche. Bernard has extensive international and local experience having worked for nearly three years with financial institutions in the UK (London) and having audited numerous companies listed on the JSE in South Africa. He is a member of the South African Institute of Chartered Accountants.

The process of submitting the EMP501 reconciliations to SARS does not have to be complicated as long as you know how.  Let’s start at the beginning…

Who Should Register for Paye-As-You-Earn (PAYE)?

All employers who pay salaries to employees in their organisation should be registered with SARS for PAYE.  If the salaries of all the employees are below the income tax threshold then there may be an argument for not having to register for PAYE, but, it would still be advisable to register for PAYE with SARS to cater for UIF and SDL (if applicable) payments (an employer cannot only register with SARS for UIF and SDL (if applicable) but firstly requires a PAYE number).  UIF can be paid directly to the Department of Labour, but, in practice, most employers pay UIF via SARS for convenience.  Registration for SDL is required if the total salary bill in the organisation is expected to exceed R500,000 in the next 12 months. The monthly liability of the employer for PAYE, UIF and SDL and any related payment has to be submitted to SARS by the 7th day of the following month (using an EMP201 return) in order to avoid penalties and interest.

Are There Exceptions to Who Must Register for PAYE?

There are no exceptions and all employers, whether commercial entities, non-profit organisations, schools, government bodies, etc. all need to register wtih SARS for PAYE, UIF and SDL (if applicable).

The Purpose of the EMP501 Reconciliations?

The purpose of the reconciliations is to ensure that the actual PAYE, UIF and SDL (if applicable) liability of the employer matches what was actually submitted on the monthly EMP201 returns.  SARS will issue a notification to the employer in cases where too much/too little has been paid to SARS.  In cases where the employer has paid too little, they will be liable for penalties and interest on any underpayments and would need to make a top-up payment to SARS following the submission of the EMP501 reconciliation.

Deadlines for Submission of the EMP501 Reconciliations?

SARS requires every employer to submit their EMP501 reconciliation twice a year.  Deadline dates are as follows:

  • Interim reconcilation – this covers the period March to August each year and the deadline for submission is usually 31 October each year.
  • Final reconciliation – this covers the period March to February each year and the deadline from submission is usually 31 May each year.

The interim reconciliation only covers the first six months of each financial year whereas the final reconciliation coverts the entire year.  From the final reconciliation, an employer is able to prepare an IRP5 certificate for each employee.

How to Submit the EMP501 Reconciliations?

The EMP501 reconcilations may only be submitted online (directly via eFiling) or via the e@syFILE application which can be downloaded from the SARS website. Once the final reconciliation has been submitted, the employer is able to generate IRP5 certificates for every employee in their organisation.